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Finance 3000 Quiz 3 > Quiz 3 > Flashcards

Quiz 3 Flashcards

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1
Q

What is a bond?

A

A form of interest only bond

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2
Q

Face (Par) Value

A

Principal amount paid when the bond matures

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3
Q

Coupon

A

invest payment

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4
Q

Coupon Rate

A

Some percentage of par value

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5
Q

Maturity

A

Date when principal amount is to be paid

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6
Q

Yield to Maturity

A

The discount rate used to value a bond, going rate on the market for bonds of similar risk

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7
Q

How do you value a bond?

A

PV coupons + PV par or PV annutiy + PV lump sum

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8
Q

What is the indenture?

A

Basic terms of the bonds

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9
Q

Security

A

Collateral – secured by financial securities
Mortgage – secured by real property, normally land or buildings
Debentures – unsecured
Notes – unsecured debt with original maturity less than 10 years

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10
Q

Seniority

A

Your ranking of when you get your bond`

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11
Q

Repayment

A

Sinking fund

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12
Q

Call premium

A

permit the security issuer to redeem the securities before they mature.

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13
Q

Deferred Call

A

permit the security issuer to redeem the securities before they mature.

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14
Q

Treasury Securities

A

= Federal government debt

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15
Q

Treasury Bills (T-bills)

A

Pure discount bonds

The original maturity of one year or less

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16
Q

Treasury notes

A

Coupon debt

Original maturity between one and ten years

17
Q

Treasury bonds

A

Coupon debt

Original maturity greater than ten years

18
Q

2 main bond rating agencies

A

Moody and Standard & Poor’s

19
Q

Investment grade

A

AAA Best Quality
AA High Quality
A Upper Medium Grade
BBB Medium Grade

20
Q

Junk

A

Below investment grade (Starts at BB - Speculative)

21
Q

Debenture

A

a type of debt instrument that is not secured by physical assets or collateral
Ex. T-Bills and T-Bonds

22
Q

Zero coupon bond

A

A bond in which no periodic coupon is paid over the life of the contract. Instead, both the principal and the interest are paid at the maturity date. Pays no interest

23
Q

Floating-rate bond

A

Variable interest rate

24
Q

Plain vanilla bond

A

Fixed interest rate

25
Q

Convertable bond

A

is one way for a company to minimize negative investor interpretation of its corporate actions.

Read more: Convertible Bond https://www.investopedia.com/terms/c/convertiblebond.asp#ixzz5AJS6e3M1
Follow us: Investopedia on Facebook

26
Q

Put Bond

A

A put bond is a bond that allows the bondholder to force the issuer to repurchase the security at specified dates before maturity.

27
Q

Realized Yield

A

The yield you actually earn for the period in which you hold a bond. Calculated when you sell a bond before its maturity date

28
Q

Common Stock

A

Equity without priority for dividends or in bankruptcy

29
Q

Cumulative voting

A

A procedure in which a shareholder may cast all votes for one member of the board directors

30
Q

Straight voting

A

A procedure in which a shareholder may cast all votes for each member of the board of directors - freezes out minority shareholders as the majority has control over who gets elected

31
Q

Staggered voting

A

only a fractured of the directorships are up for election at a particular time

32
Q

Proxy voting

A

A grant of authority by a shareholder allowing another individual to vote on behalf of that shareholder

33
Q

Classes of stock

A

companies may have different classes of stock, typically created with unequal voting rights (Class A vs. Class B)

34
Q

Preferred Stock

A

Stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without voting rights

35
Q

Primary Market

A

The market in which new securities are originally sold to investors

36
Q

Secondary Market

A

The market in which previously issued securities are traded among investors

37
Q

Dealers

A

An agent who buys and sells securities from inventory bid price vs. ask price (car dealer)

38
Q

Broker

A

An agent who arranges security transactions among investors - earns a commission (real estate agent)

Finance 3000 Quiz 3 (3 decks)

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